PP Guide No.16: Avoid Losing your Deposit?



In our post about what to look for in an Agreement we went into detail about the clauses that could put you in breach on contract and subsequently put your deposit and the entire transaction in jeopardy. You end up with no house and no money. Here some things you should confirm..


Duration

This point speaks to the length of time you have to close the transaction from the second you sign it. You need to confirm whether the “days to close” refers to calendar or business days. The time difference could be substantial. For example in 2019 January 1st to March 31st which is 90 calendar days is only 62 business days as this excludes Saturdays Sundays and Holidays. Just so that there is clarity on both side be sure to have your attorney confirm the definition of a day.

Financing

If you are expecting to obtain financing you want to be absolutely sure that that agreement notes that the offer is subject to financing meaning that in the event the bank determined that you cannot obtain financing for whatever reason that you can be entitled to a full refund of the funds vested as a deposit. If you don’t ensure this clause is present and worse if its not there you are saying that whether I obtain financing or not my deposit is not refundable.

Customarily a sales agreement would include a twenty-one (21) day subject to financing clause which binds you to make the seller and their attorney aware of your ability to obtain financing. If you don’t notify that selling side that you haven’t obtains financing it will be assumed that you have gotten approval. This is another reason why it is important to have your ducks in a row so as to avoid putting your deposit as risk.

If you do these things you can ensure that you don't lose your life savings in your search for your perfect property.

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